A 35-acre studio complex was thriving until drug-related violence and tough competition interfered. Now, with 'Little Boy,' it's trying for a comeback.

A huge replica of the Titanic, shown in 1997, was built at Baja Studios for… (Los Angeles Times )

Reporting from Rosarito Beach, Mexico — Hollywood made a big splash here when it sank the movie replica of the "Titanic" in an enormous water tank built specifically for the cinematic spectacle. The films "Master and Commander" and "Pearl Harbor" followed, with the cannon shots and explosions from those productions rattling high-rise condos and palapa bars up and down the craggy Baja California coast.

But fears of drug wars and incentives from rival production facilities all but shut down film-making at Baja Studios, a 35-acre facility on a bluff overlooking the Pacific. Also closed was the Titanic-inspired theme park, which once drew thousands to gawk at the mementos from Hollywood's second-biggest box office film of all time.

Now, movie fever may be building again. Cameras began rolling this summer on the first feature filmed in years at the studio. The movie, "Little Boy," a World War II-era film set in a Northern California fishing town, drew Academy Award-nominated actors, put local movie crews to work and signaled the studio's ability to still lure major productions south of the border.

Casting the film was a challenge as some actors shied away because they feared local crime, said Eduardo Verastegui, "Little Boy's" executive producer. But the 12-week shoot went off without a hitch for a cast that eventually included Kevin James, Tom Wilkinson and Emily Watson.

"They lived there for a while and were having a great time, and loving the people," Verastegui said. "It's an amazing studio … and you save a lot of money at the same time."

Built in 1996 by 20th Century Fox, Baja Studios has four sound stages and outdoor water tanks that are among the biggest in the world. Other pluses: Local film crews are cheaper than their Hollywood counterparts and the studio's location just south of Rosarito Beach is a few hours' drive from Southern California. The trip is even shorter for people using the facility's heliport.

Over the years, all or part of about nine films were produced there. In 2005, one of the stages hosted rehearsals for the rock group U2 ahead of the band's Vertigo world tour. In 2007, 20th Century Fox sold the studio to a group of local investors who hoped to make it a job growth engine in the region.

But in 2008, during pre-production work for the "Chronicles of Narnia: Prince Caspian," Mexico's drug war flared in Rosarito Beach. Seven cops were killed in one month, and the studio moved the production to New Zealand.

Security concerns were only part of the reason for the switch, according to Kurt Honold, a Tijuana-based businessman who is part of an investors' group that owns the studio. With facilities elsewhere offering aggressive incentive packages, Baja Studios, as well as the broader Mexican film industry, had lost its competitive edge, he said.

The Mexican government responded by establishing incentive packages offering up to 17.5% cash rebates and tax breaks for the costs of movies shot in Mexico. President Felipe Calderon announced the incentives program at the studio in March 2010, saying he wanted Mexico to become "Latin America's movie capital."

U.S. and international locales continue rolling out ever-more enticing incentive packages, so Mexico's ability to attract film shoots faces serious challenges. Some observers say that Mexico's incentives still don't match other regions' aggressive offerings. And negative perceptions about drug violence persist, even though crime in Baja California has declined significantly in the last two years.

Mexican investors and government officials are hoping that the studio's track record for turning out blockbusters will provide an edge. With a deep pool of local film crew professionals, many of whom have worked in Hollywood, the studio is a "turn-key solution," said Ricardo Alvarez, the head of innovation at Pro Mex, the government agency that promotes the film industry.

"We have the people, we have the resources, we have the facilities and we have the supply chain," he said. "It's one of the advantages of being so close to Hollywood. Lots of our talent has experience working in Hollywood productions. That is really helpful. It allows you to solidify your credentials."

For Rosarito Beach, the movie dollars and big-spending studio executives and stars nourish all levels of an economy struggling from a collapse in tourism. During film shoots, actors and production crews fill dozens of hotel rooms and oceanfront homes. Residents still remember the sight of Russell Crowe jogging from his hotel to the studio every morning, and photos of Leonardo DiCaprio line the walls at a nearby Marriott Hotel.